Budget 2023-24 Expectation: Decisive policy decisions required to create future-ready fintech industry

The year 2023 is pivotal for the Indian economy (estimated to become a $3.7 trillion economy this year). Startup and fintech sectors hope to see some favorable measures from the Union Budget 2023 to further boost their growth. Fintech and startups will play a defining role in the growth of the economy and the industry is seeking decisive policy decisions to reinvigorate the economy.

An enabling regulatory environment

Regulation in the fintech sector is important to ensure stability and protect consumers. The government should focus on providing clarity in the upcoming Budget by outlining specific regulations for the fintech industry and addressing any current gray areas. Government agencies such as the Securities and Exchange Commission (SEC) and the Consumer Financial Protection Bureau (CFPB) can play an important role in providing guidance and oversight for the fintech industry. Moreover, many financial regulators have teams or points of contact (POCs) designated to interact and work with fintech companies that may not yet be regulated. These teams or POCs can provide guidance on regulatory compliance and help fintech companies navigate the regulatory landscape.

Simplify and streamline KYC process

Easing the Know Your Customer (KYC) requirements for both registered entities (REs) and fintech can help to streamline the onboarding process for customers and reduce compliance costs for businesses. Providing fintech with access to the Central KYC (CKYC) repository can help to improve the accuracy and completeness of the data in the repository, as well as reduce the compliance burden for fintech.

Digitization of all compliance and lending processes

The upcoming Budget should focus on the digitization of compliance and lending processes to improve efficiency, reduce costs, and increase access to financial services for individuals and businesses. Investing in digital infrastructure such as a national digital identity system can help to streamline the process of verifying customer identities and reduce the need for physical documents. The government should focus on incentivizing financial institutions and fintech to adopt digital lending platforms by providing tax breaks or other financial incentives. Collaboration between traditional financial institutions and fintech companies, to leverage the strengths of both can also bring in advanced digital lending services to the end-users.

Increase limits on UPI, NACH, and other instruments

Increasing the limits on Unified Payments Interface (UPI), National Automated Clearing House (NACH) and other digital payment instruments can help to align them with the growing economy and the needs of businesses. This will promote the use of digital payments in the country and ensure financial inclusion. The government should invest in training, educating, and providing technical assistance to SMEs on how to use digital payment instruments and making these instruments more accessible to them in order to fully realize the goal of financial inclusion.

Need for a fast-track account aggregator

The upcoming Budget should focus on providing a fast-track account aggregator and adding more Financial Information Providers (FIPs) that can help to make information gathering easier and decision making faster. A fast-track account aggregator can help to speed up the development and deployment of this technology, making it more widely available to customers. Adding more FIPs to the account aggregator can also help to make information gathering easier by providing customers with more complete and accurate information about their financial accounts. This will help improve the customer experience and make it easier for customers to make informed decisions about their finances.

Expanding TREDS platform to non-MSMEs

This initiative will increase access to short-term finance for a wider range of businesses by increasing the size limit for businesses that are eligible to use the platform and providing more flexibility to borrowers. The government should consider offering more guarantees or other forms of support for non-MSMEs that use the TREDS platform to reduce the risks for the lenders and make the platform more attractive for them.

Amending IBC

The government should consider amending and making the Insolvency and Bankruptcy Code (IBC) stronger to make it more effective in dealing with the COVID-19 pandemic-induced stress. This will ensure a faster provision of credit and in turn propel economic growth by streamlining the process. This step will also give more confidence to lenders which in turn will increase credit availability to SMEs.

The writer is Chief Technology and Product Officer at Kredx India—a supply chain finance platform. He tweets @devangmundhra @kredxindia. Views expressed are personal. 

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